Saudi Arabia’s Capital Markets Authority (CMA) announced plans to open its financial markets to all foreign investors, effective February 1. This decision marks a significant step in the Kingdom’s efforts to attract more international capital. The amendments eliminate the Qualified Foreign Investor (QFI) status, removing previous restrictions that limited direct investment to a select group of international investors with consistent access to the Saudi capital market.
The CMA stated that this move will enable investors worldwide to invest directly in the Saudi capital market, supporting increased capital inflows and improved market liquidity. Saudi Arabia is actively pursuing economic diversification to reduce its reliance on oil. This strategy includes attracting foreign investors and establishing exchange-traded funds (ETFs) with Asian partners in key financial hubs like Japan and Hong Kong.
Last year, regulators also permitted foreign investors to purchase shares in listed companies owning real estate in Mecca and Medina, while maintaining restrictions on direct land ownership. While JP Morgan anticipates a limited immediate impact, noting that most institutional investors already have access, they highlight that the market is keenly awaiting changes to foreign ownership limits, which could have a more substantial positive effect. JPM does not foresee this occurring before the second half of the year at the earliest.
In September, Saudi stocks experienced a surge following reports that the CMA might ease the 49% cap on foreign ownership of listed firms. This potential change could help reinvigorate interest in the Arab world’s largest stock exchange. According to LSEG data, the Saudi benchmark index (.TASI) declined by 12.8% last year and has decreased by 1.9% year-to-date.
